1. News Release
Contact:
Steve Dale H. D. McCullough Judith T. Murphy
Media Relations Investor Relations Investor Relations
(612) 303-0784 (612) 303-0786 (612) 303-0783
U.S. BANCORP REPORTS RECORD NET INCOME FOR THE
SECOND QUARTER OF 2005
EARNINGS SUMMARY Table 1
($ in millions, except per-share data) Percent Percent
Change Change
2Q 1Q 2Q 2Q05 vs 2Q05 vs YTD YTD Percent
2005 2005 2004 1Q05 2Q04 2005 2004 Change
Net income $1,121 $1,071 $1,037 4.7 8.1 $2,192 $2,045 7.2
Earnings per share (diluted) 0.60 0.57 0.54 5.3 11.1 1.17 1.06 10.4
Return on average assets (%) 2.23 2.21 2.19 2.22 2.16
Return on average equity (%) 22.7 21.9 21.9 22.3 21.3
Efficiency ratio (%) 48.3 41.7 38.6 45.1 42.7
Dividends declared per share $0.30 $0.30 $0.24 -- 25.0 $0.60 $0.48 25.0
Book value per share (period-end) 10.88 10.43 9.91 4.3 9.8
Net interest margin (%) 3.99 4.08 4.28 4.03 4.28
MINNEAPOLIS, July 19, 2005 – U.S. Bancorp (NYSE: USB) today reported net income
of $1,121 million for the second quarter of 2005, compared with $1,037 million for the second
quarter of 2004. Net income of $.60 per diluted share in the second quarter of 2005 was higher than
the same period of 2004 by $.06 (11.1 percent). Return on average assets and return on average
equity were 2.23 percent and 22.7 percent, respectively, for the second quarter of 2005, compared
with returns of 2.19 percent and 21.9 percent, respectively, for the second quarter of 2004.
U.S. Bancorp Chairman and Chief Executive Officer Jerry A. Grundhofer said, “I am very
proud to announce that our Company has achieved another quarter of record earnings and industry
leading returns on equity and assets. The results included strong year-over-year and seasonal
growth in our fee-based businesses, as well as exceptional credit quality. Loan growth in the
second quarter of 2005 was excellent, increasing 8.3 percent over the same quarter of 2004 and at
an annualized rate of 11.2 percent over the prior quarter. Once again, we exceeded our stated target
2. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 2
and returned 92 percent of earnings to our shareholders during the quarter in the form of dividends
and share repurchases.
“Fee revenue, excluding the impact of securities gains (losses), continued to drive revenue
growth this quarter, increasing 8.9 percent over the second quarter of 2004. Investments and core
growth in our Payments Services and Consumer Banking business units were the primary drivers of
the growth in fees, increasing 17.1 percent and 6.1 percent, respectively.
“The growth in commercial loans was particularly encouraging this quarter, as average
outstandings grew 9.0 percent over the second quarter of 2004 and, more importantly, at an
annualized rate of 16.8 percent over the first quarter of 2005. Although credit spreads continued to
tighten, accounting for 4 of the 9 basis point drop in the net margin on a linked quarter basis, we
have remained competitive and disciplined in our approach to the market, capitalizing on our ability
to compete on price while offering a wide array of non-credit products to fulfill our customers’
needs.
“I am especially pleased with the exceptional improvement we have seen in the Company’s
credit quality over the past year. Our loss and coverage ratios are better than our Company has
experienced in many years and are the direct result of the actions we have taken to reduce the risk
profile of the Company. We expect to continue to grow our credit-related businesses, both
commercial and retail, while maintaining the discipline that has helped us reach these quality
metrics today.
“We are well on our way to meeting our financial goals for 2005 and beyond. We will
continue to invest in our franchise, as we have been, to create and enhance our set of products and
services, increase our market penetration and provide outstanding service to our customers.”
The Company’s results for the second quarter of 2005 improved over the same period of 2004,
as net income rose by $84 million (8.1 percent), primarily due to growth in fee-based products and
services, reduced credit costs and lower tax expense. During the second quarter of 2005, the
Company recognized a $53 million impairment of its mortgage servicing rights (“MSR”) asset,
reflecting lower longer-term interest rates in the second quarter of 2005, compared with the
recognition of $171 million reparation of its MSR asset in the second quarter of 2004. Also
included in the second quarter of 2005 results was a $54 million charge related to a completed
tender offer for debt securities and a $94 million reduction in income tax expense related to the
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3. U.S. Bancorp Reports Second Quarter 2005 Results
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resolution of federal tax examinations covering all of the Company’s legal entities for all years
through 2002.
Total net revenue on a taxable-equivalent basis for the second quarter of 2005 was $281
million (9.3 percent) higher than the second quarter of 2004, primarily reflecting 8.9 percent growth
in fee-based revenue across the majority of fee categories, expansion in payments processing
businesses and a $173 million favorable variance in securities gains (losses), partially offset by a
1.0 percent reduction in net interest income.
Total noninterest expense in the second quarter of 2005 was $362 million (29.4 percent) higher
than the second quarter of 2004, primarily reflecting the $224 million unfavorable change in the
valuation of mortgage servicing rights and the $54 million charge related to the Company’s recent
tender offer for certain subordinated and trust preferred debt securities. In addition, expenses
reflected incremental costs related to expanding the payment processing businesses, investments in
in-store branches, adding middle market and community bankers, marketing initiatives and higher
pension costs from a year ago.
Provision for credit losses for the second quarter of 2005 was $144 million, a decrease of $60
million (29.4 percent) from the second quarter of 2004. The decrease in the provision for credit
losses year-over-year reflected a decrease in total net charge-offs. Net charge-offs in the second
quarter of 2005 were $144 million, compared with the first quarter of 2005 net charge-offs of $172
million and the second quarter of 2004 net charge-offs of $204 million. Total nonperforming assets
declined to $610 million at June 30, 2005, from $665 million at March 31, 2005 (8.3 percent), and
$911 million at June 30, 2004 (33.0 percent). The ratio of the allowance for credit losses to
nonperforming loans was 441 percent at June 30, 2005, compared with 404 percent at March 31,
2005, and 299 percent at June 30, 2004.
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4. U.S. Bancorp Reports Second Quarter 2005 Results
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INCOME STATEMENT HIGHLIGHTS Table 2
(Taxable-equivalent basis, $ in millions, Percent Percent
except per-share data) Change Change
2Q 1Q 2Q 2Q05 vs 2Q05 vs YTD YTD Percent
2005 2005 2004 1Q05 2Q04 2005 2004 Change
Net interest income $1,761 $1,751 $1,779 0.6 (1.0) $3,512 $3,558 (1.3)
Noninterest income 1,541 1,382 1,242 11.5 24.1 2,923 2,560 14.2
Total net revenue 3,302 3,133 3,021 5.4 9.3 6,435 6,118 5.2
Noninterest expense 1,595 1,331 1,233 19.8 29.4 2,926 2,688 8.9
Income before provision and income taxes 1,707 1,802 1,788 (5.3) (4.5) 3,509 3,430 2.3
Provision for credit losses 144 172 204 (16.3) (29.4) 316 439 (28.0)
Income before income taxes 1,563 1,630 1,584 (4.1) (1.3) 3,193 2,991 6.8
Taxable-equivalent adjustment 7 7 7 -- -- 14 14 --
Applicable income taxes 435 552 540 (21.2) (19.4) 987 932 5.9
Net income $1,121 $1,071 $1,037 4.7 8.1 $2,192 $2,045 7.2
Diluted earnings per share $0.60 $0.57 $0.54 5.3 11.1 $1.17 $1.06 10.4
Net Interest Income
Second quarter net interest income on a taxable-equivalent basis was $1,761 million,
compared with $1,779 million recorded in the second quarter of 2004. Average earning assets for
the period increased over the second quarter of 2004 by $9.7 billion (5.8 percent), primarily driven
by a $3.3 billion (8.2 percent) increase in retail loans, a $3.2 billion (8.1 percent) increase in total
commercial loans and a $3.1 billion (22.4 percent) increase in residential mortgages. The positive
impact to net interest income from the growth in earning assets was more than offset by a lower net
interest margin. The net interest margin in the second quarter of 2005 was 3.99 percent, compared
with 4.28 percent in the second quarter of 2004. The decline in the net interest margin reflected the
current lending environment, asset/liability management decisions and the impact of changes in the
yield curve from a year ago. Since the second quarter of 2004, credit spreads have tightened by
approximately 18 basis points across most lending products due to competitive pricing and a change
in mix due to growth in lower spread credit products. The net interest margin also declined due to
funding incremental growth with higher cost wholesale funding and asset/liability decisions
designed to maintain a relatively neutral rate risk position, including reducing the duration of the
securities portfolio, funding asset growth with more fixed rate long term debt and a 56 percent
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5. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
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reduction in the net receive fixed swap position between June 30, 2004, and June 30, 2005.
Increases in the margin benefit of deposits and net free funds helped to partially offset these factors.
Net interest income in the second quarter of 2005 was higher than the first quarter of 2005
by $10 million (.6 percent). Average earning assets grew quarter-over-quarter by $3.4 billion (2.0
percent). Growth in most loan categories, including a 3.7 percent increase in total commercial
loans, drove the increase in average earning assets over the prior quarter. The positive impact to net
interest income from the growth in earning assets and day basis was partially offset by a lower net
interest margin. The net interest margin in the second quarter of 2005 was 9 basis points lower than
the net interest margin of 4.08 percent recorded in the first quarter of 2005. The decline in the net
interest margin from the first quarter of 2005 reflected tighter credit spreads (4 basis points) due to
increased competition, in addition to changes in loan mix. Higher short-term rates, funding a higher
percentage of earning asset growth with wholesale funding and asset/liability actions designed to
maintain a relatively neutral rate risk position, including a 31 percent reduction in the net receive
fixed swap position between March 31, 2005, and June 30, 2005, also contributed to the margin
reduction. This was partially offset by the higher margin benefit of deposits and net free funds and
loan fees.
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6. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
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NET INTEREST INCOME Table 3
(Taxable-equivalent basis; $ in millions)
Change Change
2Q 1Q 2Q 2Q05 vs 2Q05 vs YTD YTD Percent
2005 2005 2004 1Q05 2Q04 2005 2004 Change
Components of net interest income
Income on earning assets $2,572 $2,442 $2,243 $130 $329 $5,014 $4,508 $506
Expense on interest-bearing liabilities 811 691 464 120 347 1,502 950 552
Net interest income $1,761 $1,751 $1,779 $10 $(18) $3,512 $3,558 $(46)
Average yields and rates paid
Earning assets yield 5.83% 5.69% 5.39% 0.14% 0.44% 5.76% 5.43% 0.33%
Rate paid on interest-bearing liabilities 2.23 1.97 1.38 0.26 0.85 2.10 1.42 0.68
Gross interest margin 3.60% 3.72% 4.01% (0.12%) (0.41%) 3.66% 4.01% (0.35%)
Net interest margin 3.99% 4.08% 4.28% (0.09%) (0.29%) 4.03% 4.28% (0.25%)
Average balances
Investment securities $42,341 $42,813 $42,489 $(472) $(148) $42,576 $43,617 $(1,041)
Loans 131,275 127,654 121,161 3,621 10,114 129,474 119,985 9,489
Earning assets 176,730 173,294 166,990 3,436 9,740 175,022 166,674 8,348
Interest-bearing liabilities 146,070 142,052 134,819 4,018 11,251 144,072 134,893 9,179
Net free funds* 30,660 31,242 32,171 (582) (1,511) 30,950 31,781 (831)
* Represents noninterest-bearing deposits, allowance for loan losses, unrealized gain (loss) on available-for-sale securities,
non-earning assets, other noninterest-bearing liabilities and equity.
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7. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
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AVERAGE LOANS Table 4
($ in millions) Percent Percent
Change Change
2Q 1Q 2Q 2Q05 vs 2Q05 vs YTD YTD Percent
2005 2005 2004 1Q05 2Q04 2005 2004 Change
Commercial $37,595 $36,083 $34,484 4.2 9.0 $36,843 $34,057 8.2
Lease financing 4,922 4,914 4,846 0.2 1.6 4,918 4,873 0.9
Total commercial 42,517 40,997 39,330 3.7 8.1 41,761 38,930 7.3
Commercial mortgages 20,156 20,268 20,477 (0.6) (1.6) 20,212 20,515 (1.5)
Construction and development 7,426 7,236 6,639 2.6 11.9 7,331 6,598 11.1
Total commercial real estate 27,582 27,504 27,116 0.3 1.7 27,543 27,113 1.6
Residential mortgages 17,198 15,827 14,052 8.7 22.4 16,517 13,831 19.4
Credit card 6,527 6,417 5,989 1.7 9.0 6,472 5,933 9.1
Retail leasing 7,314 7,198 6,484 1.6 12.8 7,256 6,338 14.5
Home equity and second mortgages 15,003 14,844 13,775 1.1 8.9 14,924 13,575 9.9
Other retail 15,134 14,867 14,415 1.8 5.0 15,001 14,265 5.2
Total retail 43,978 43,326 40,663 1.5 8.2 43,653 40,111 8.8
Total loans $131,275 $127,654 $121,161 2.8 8.3 $129,474 $119,985 7.9
Average loans for the second quarter of 2005 were $10.1 billion (8.3 percent) higher than the
second quarter of 2004, driven by growth in average retail loans of $3.3 billion (8.2 percent), total
commercial loans of $3.2 billion (8.1 percent) and residential mortgages of $3.1 billion (22.4
percent). Total commercial real estate loans also increased slightly year-over-year by $466 million
(1.7 percent). Average loans for the second quarter of 2005 were higher than the first quarter of
2005 by $3.6 billion (2.8 percent), reflecting growth in substantially all loan categories.
Average investment securities in the second quarter of 2005 were $148 million (.3 percent)
lower than in the second quarter of 2004. Investment securities at June 30, 2005, were $2.0 billion
higher than at June 30, 2004, but $804 million lower than the balance at March 31, 2005. The
changes in the balance of the investment securities portfolio from a year ago principally reflected
the net impact of repositioning the investment portfolio during 2004 as part of asset/liability risk
management decisions to acquire variable rate and shorter-term fixed securities to reduce the
effective duration of the portfolio and to maintain a relatively neutral interest rate risk position. The
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July 19, 2005
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decline from first quarter of 2005 primarily represented maturities or prepayments with the
proceeds being utilized to fund loan growth. During the second quarter of 2005, the Company
retained its mix of approximately 39 percent variable rate securities.
AVERAGE DEPOSITS Table 5
($ in millions) Percent Percent
Change Change
2Q 1Q 2Q 2Q05 vs 2Q05 vs YTD YTD Percent
2005 2005 2004 1Q05 2Q04 2005 2004 Change
Noninterest-bearing deposits $29,148 $28,417 $30,607 2.6 (4.8) $28,784 $29,815 (3.5)
Interest-bearing deposits
Interest checking 23,024 23,146 20,739 (0.5) 11.0 23,085 20,844 10.8
Money market accounts 29,563 30,264 34,242 (2.3) (13.7) 29,911 34,320 (12.8)
Savings accounts 5,886 5,968 5,936 (1.4) (0.8) 5,927 5,917 0.2
Savings products 58,473 59,378 60,917 (1.5) (4.0) 58,923 61,081 (3.5)
Time certificates of deposit less
than $100,000 13,152 12,978 13,021 1.3 1.0 13,066 13,319 (1.9)
Time deposits greater than $100,000 20,459 18,650 12,571 9.7 62.7 19,559 12,352 58.3
Total interest-bearing deposits 92,084 91,006 86,509 1.2 6.4 91,548 86,752 5.5
Total deposits $121,232 $119,423 $117,116 1.5 3.5 $120,332 $116,567 3.2
Average noninterest-bearing deposits for the second quarter of 2005 were lower than the
second quarter of 2004 by $1.5 billion (4.8 percent). The year-over-year change in the average
balance of noninterest-bearing deposits was impacted by product changes in the Consumer Banking
business line. In late 2004, the Company migrated approximately $1.3 billion of noninterest-
bearing deposit balances to interest checking accounts as an enhancement to its Silver Elite
Checking product. Average branch-based noninterest-bearing deposits in the second quarter of
2005, excluding the migration of certain high-value customers to Silver Elite Checking, were higher
by approximately $200 million (1.7 percent) over the same quarter of 2004, as net new checking
accounts continue to grow. Average noninterest-bearing deposits in other areas, including
commercial banking and private client, trust and asset management, also increased year-over-year.
These favorable variances were offset, however, by expected declines in average noninterest-
bearing deposits in corporate banking as customers utilize their excess liquidity.
Average total savings products declined year-over-year by $2.4 billion (4.0 percent), due to
reductions in average money market account balances and savings accounts, partially offset by
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higher interest checking balances. Average branch-based interest checking deposits increased by
$2.5 billion (16.5 percent) over the same quarter of 2004, in part, due to the change in the Silver
Elite Checking product, as well as new account growth. Average branch-based interest checking
deposits, excluding Silver Elite Checking, were higher by approximately $1.2 billion (8.0 percent)
year-over-year. This positive variance in branch-based interest checking account deposits was
partially offset by reductions in other areas, principally corporate banking. Average money market
account balances declined by $4.7 billion (13.7 percent) year-over-year, with the largest declines in
the branches, national corporate banking and government banking. The overall decrease in average
money market account balances year-over-year was the result of the Company’s deposit pricing
decisions. A portion of the money market balances have migrated to time deposits greater than
$100,000 as rates increased on the time deposit products.
Average time certificates less than $100,000 were higher in the second quarter of 2005 than the
second quarter of 2004 by $131 million (1.0 percent). The Company also experienced year-over-
year growth in average time deposits greater than $100,000 of $7.9 billion (62.7 percent), most
notably in corporate banking, as customers migrated balances to higher rate deposits.
Average noninterest-bearing deposits for the second quarter of 2005 were $731 million (2.6
percent) higher than the first quarter of 2005. Average savings products declined by $905 million
(1.5 percent) in the current quarter from the first quarter of 2005. Average interest checking
deposits declined slightly quarter-over-quarter, the net result of higher average branch-related
interest checking balances (2.2 percent), offset by lower balances in other business lines, principally
corporate banking. Average money market account balances declined by $701 million (2.3 percent)
as the Company continued to lag deposit pricing. Time certificates of deposit less than $100,000
increased modestly from the first quarter of 2005, while time deposits greater than $100,000 rose by
$1.8 billion (9.7 percent), primarily due to growth in corporate banking customer balances and
foreign branch time deposits.
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10. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
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NONINTEREST INCOME Table 6
($ in millions) Percent Percent
Change Change
2Q 1Q 2Q 2Q05 vs 2Q05 vs YTD YTD Percent
2005 2005 2004 1Q05 2Q04 2005 2004 Change
Credit and debit card revenue $177 $154 $159 14.9 11.3 $331 $301 10.0
Corporate payment products revenue 120 107 103 12.1 16.5 227 198 14.6
ATM processing services 57 47 45 21.3 26.7 104 87 19.5
Merchant processing services 198 178 165 11.2 20.0 376 306 22.9
Trust and investment management fees 253 247 251 2.4 0.8 500 500 --
Deposit service charges 234 210 202 11.4 15.8 444 387 14.7
Treasury management fees 117 107 121 9.3 (3.3) 224 239 (6.3)
Commercial products revenue 100 96 108 4.2 (7.4) 196 218 (10.1)
Mortgage banking revenue 110 102 110 7.8 -- 212 204 3.9
Investment products fees and commissions 39 39 43 -- (9.3) 78 82 (4.9)
Securities gains (losses), net 1 (59) (172) nm nm (58) (172) (66.3)
Other 135 154 107 (12.3) 26.2 289 210 37.6
Total noninterest income $1,541 $1,382 $1,242 11.5 24.1 $2,923 $2,560 14.2
Noninterest Income
Second quarter noninterest income was $1,541 million, an increase of $299 million (24.1
percent) from the same quarter of 2004, and $159 million (11.5 percent) higher than the first quarter
of 2005. The increase in noninterest income over the second quarter of 2004 was driven by
favorable variances in securities gains (losses) and in the majority of fee income categories. Credit
and debit card revenue and corporate payment products revenue were both higher in the second
quarter of 2005 than the second quarter of 2004 by $18 million and $17 million, or 11.3 percent and
16.5 percent, respectively. The growth in credit and debit card revenue was driven by higher
transaction volumes and rate changes. The corporate payment products revenue growth reflected
growth in sales, card usage, rate changes and the recent acquisition of a small fleet card business.
ATM processing services revenue was higher by $12 million (26.7 percent) in the second quarter of
2005 than the same quarter of the prior year, primarily due to the expansion of the ATM business in
May of 2005. Merchant processing services revenue was higher in the second quarter of 2005 than
the same quarter of 2004 by $33 million (20.0 percent), reflecting an increase in sales volume, new
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business, higher equipment fees and the expansion of business in Europe. Deposit service charges
were higher year-over-year by $32 million (15.8 percent) due to account growth and transaction-
related fees. Other income was higher by $28 million (26.2 percent), primarily due to higher
income from equity investments relative to the same quarter of 2004. Partially offsetting these
positive variances year-over-year were commercial products revenue, treasury management fees
and investment products fees and commissions, which declined by $8 million (7.4 percent), $4
million (3.3 percent) and $4 million (9.3 percent), respectively. Commercial products revenue
declined due to reductions in loan fees and international product revenue. The decrease in treasury
management fees was primarily due to higher earnings credit on customers’ compensating balances.
The decline in investment management fees and commissions reflected lower sales volume relative
to the same quarter in 2004.
Noninterest income was higher in the second quarter of 2005 than the first quarter of 2005 by
$159 million (11.5 percent), primarily due to a $60 million favorable change in gains (losses) on the
sale of securities and increases in the majority of the remaining fee income categories. Credit and
debit card revenue, corporate payment products revenue and merchant processing services rose by
$23 million (14.9 percent), $13 million (12.1 percent) and $20 million (11.2 percent), respectively,
reflecting seasonally higher sales. ATM processing services revenue increased by $10 million (21.3
percent) primarily due to the expansion of the business. Deposit service charges were higher by
$24 million (11.4 percent) in the second quarter of 2005 compared with the first quarter of 2005,
reflecting higher transaction-related fees and net new account growth. The increase in trust and
investment management fees and treasury management fees over the first quarter of 2005 reflected
seasonally strong tax-related processing revenue. Mortgage banking revenue was higher by $8
million (7.8 percent) than the prior quarter due to stronger loan production. Slightly offsetting these
favorable variances was other income which was lower quarter-over-quarter by $19 million (12.3
percent), primarily due to a decline in revenue from equity investments relative to the first quarter
of 2005.
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July 19, 2005
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NONINTEREST EXPENSE Table 7
($ in millions) Percent Percent
Change Change
2Q 1Q 2Q 2Q05 vs 2Q05 vs YTD YTD Percent
2005 2005 2004 1Q05 2Q04 2005 2004 Change
Compensation $612 $567 $573 7.9 6.8 $1,179 $1,109 6.3
Employee benefits 108 116 91 (6.9) 18.7 224 191 17.3
Net occupancy and equipment 159 154 153 3.2 3.9 313 309 1.3
Professional services 39 36 35 8.3 11.4 75 67 11.9
Marketing and business development 67 43 49 55.8 36.7 110 84 31.0
Technology and communications 113 106 102 6.6 10.8 219 204 7.4
Postage, printing and supplies 63 63 60 -- 5.0 126 122 3.3
Other intangibles 181 71 (47) nm nm 252 179 40.8
Debt prepayment 54 -- 2 nm nm 54 37 45.9
Other 199 175 215 13.7 (7.4) 374 386 (3.1)
Total noninterest expense $1,595 $1,331 $1,233 19.8 29.4 $2,926 $2,688 8.9
Noninterest Expense
Second quarter noninterest expense totaled $1,595 million, an increase of $362 million (29.4
percent) over the same quarter of 2004 and a $264 million (19.8 percent) increase over the first
quarter of 2005. The increase in expense year-over-year was primarily driven by the $224 million
unfavorable change in the MSR valuation, as well as the increase of $52 million in debt prepayment
charges relative to the second quarter of 2004. Compensation expense was higher year-over-year
by $39 million (6.8 percent), principally due to business expansion of in-store branches,
investments in commercial and community bankers, expansion of the Company’s payments
processing businesses, and other growth initiatives. Employee benefits increased year-over-year by
$17 million (18.7 percent), primarily as a result of higher pension expense and payroll taxes.
Marketing and business development was higher in the second quarter of 2005 than the second
quarter of 2004 by $18 million (36.7 percent) due to marketing initiatives and the timing of
contributions to the Company’s charitable foundation. Technology and communications expense
rose by $11 million (10.8 percent), reflecting technology investments that increased software
expense, in addition to outside data processing expense. Other expense declined in the second
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quarter from the same quarter of 2004 by $16 million (7.4 percent), primarily due to decreases in
other loan expense, insurance, lower merchant charge-back risk, and other operating losses.
Noninterest expense in the second quarter of 2005 was higher than the first quarter of 2005 by
$264 million (19.8 percent). The increase in noninterest expense in the second quarter of 2005 from
the first quarter of 2005 was primarily driven by the $107 million unfavorable change in the MSR
valuation quarter-over-quarter, as well as the $54 million charge taken in connection with the
Company’s tender offer for certain debt securities in the second quarter of 2005. The increase in
compensation expense of $45 million (7.9 percent) in the second quarter over the prior quarter was
primarily due to acquisitions, merit-based salary increases and higher incentive and commission-
based compensation costs in the second quarter of 2005, while employee benefits declined by $8
million (6.9 percent) due to seasonally lower payroll taxes. Marketing and business development
and technology and communications rose quarter-over-quarter by $24 million (55.8 percent) and $7
million (6.6 percent), respectively. The variance in marketing and business development reflected
the timing of marketing programs and contributions to the Company’s charitable foundation.
Technology and communications rose relative to the prior quarter due to business investment and
increases in data transmission costs. Other expense was higher in the second quarter of 2005 than
the first quarter of 2005, primarily due to acquisition integration costs and write-downs associated
with certain co-branding and lease arrangements.
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July 19, 2005
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ALLOWANCE FOR CREDIT LOSSES Table 8
($ in millions) 2Q 1Q 4Q 3Q 2Q
2005 2005 2004 2004 2004
Balance, beginning of period $2,269 $2,269 $2,370 $2,370 $2,370
Net charge-offs
Commercial 9 14 8 2 36
Lease financing 6 13 10 19 19
Total commercial 15 27 18 21 55
Commercial mortgages 1 4 9 3 2
Construction and development (3) 2 1 3 --
Total commercial real estate (2) 6 10 6 2
Residential mortgages 8 9 8 7 7
Credit card 64 65 61 65 63
Retail leasing 5 8 9 9 10
Home equity and second mortgages 16 17 18 18 20
Other retail 38 40 39 40 47
Total retail 123 130 127 132 140
Total net charge-offs 144 172 163 166 204
Provision for credit losses 144 172 64 166 204
Acquisitions and other changes -- -- (2) -- --
Balance, end of period $2,269 $2,269 $2,269 $2,370 $2,370
Components
Allowance for loan losses $2,082 $2,082 $2,080 $2,184 $2,190
Liability for unfunded credit commitments 187 187 189 186 180
Total allowance for credit losses $2,269 $2,269 $2,269 $2,370 $2,370
Gross charge-offs $222 $231 $235 $260 $274
Gross recoveries $78 $59 $72 $94 $70
Net charge-offs to average loans (%) 0.44 0.55 0.52 0.54 0.68
Allowance as a percentage of:
Period-end loans 1.70 1.76 1.80 1.90 1.93
Nonperforming loans 441 404 355 337 299
Nonperforming assets 372 341 303 294 260
Credit Quality
The allowance for credit losses was $2,269 million at June 30, 2005, equal to the allowance for
credit losses at March 31, 2005, and slightly lower than the allowance for credit losses of $2,370
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15. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 15
million at June 30, 2004. The ratio of the allowance for credit losses to period-end loans was 1.70
percent at June 30, 2005, compared with 1.76 percent at March 31, 2005, and 1.93 percent at June
30, 2004. The ratio of the allowance for credit losses to nonperforming loans was 441 percent at
June 30, 2005, compared with 404 percent at March 31, 2005, and 299 percent at June 30, 2004.
Total net charge-offs in the second quarter of 2005 were $144 million, compared with the first
quarter of 2005 net charge-offs of $172 million and the second quarter of 2004 net charge-offs of
$204 million.
Commercial and commercial real estate loan net charge-offs were $13 million for the second
quarter of 2005, or .07 percent of average loans outstanding, compared with $33 million, or .20
percent of average loans outstanding, in the first quarter of 2005 and $57 million, or .35 percent of
average loans outstanding, in the second quarter of 2004. The decline in net charge-offs reflected a
stronger level of recoveries than prior quarters, as well as broad-based improvement in the overall
quality of the commercial loan portfolio.
Retail loan net charge-offs of $123 million in the second quarter of 2005 were $7 million (5.4
percent) lower than the first quarter of 2005 and $17 million (12.1 percent) lower than the second
quarter of 2004. Retail loan net charge-offs as a percent of average loans outstanding were 1.12
percent in the second quarter of 2005, compared with 1.22 percent and 1.38 percent in the first
quarter of 2005 and second quarter of 2004, respectively. Lower levels of retail loan net charge-
offs principally reflected the Company’s ongoing improvement in collection efforts and risk
management.
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16. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 16
CREDIT RATIOS Table 9
(Percent) 2Q 1Q 4Q 3Q 2Q
2005 2005 2004 2004 2004
Net charge-offs ratios*
Commercial 0.10 0.16 0.09 0.02 0.42
Lease financing 0.49 1.07 0.82 1.56 1.58
Total commercial 0.14 0.27 0.18 0.21 0.56
Commercial mortgages 0.02 0.08 0.18 0.06 0.04
Construction and development (0.16) 0.11 0.05 0.17 --
Total commercial real estate (0.03) 0.09 0.14 0.09 0.03
Residential mortgages 0.19 0.23 0.21 0.19 0.20
Credit card 3.93 4.11 3.82 4.21 4.23
Retail leasing 0.27 0.45 0.51 0.52 0.62
Home equity and second mortgages 0.43 0.46 0.49 0.50 0.58
Other retail 1.01 1.09 1.06 1.09 1.31
Total retail 1.12 1.22 1.18 1.26 1.38
Total net charge-offs 0.44 0.55 0.52 0.54 0.68
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans**
Commercial 0.05 0.06 0.05 0.05 0.05
Commercial real estate 0.01 0.02 -- 0.01 0.01
Residential mortgages 0.32 0.41 0.46 0.46 0.50
Retail 0.40 0.43 0.47 0.47 0.48
Total loans 0.19 0.22 0.23 0.23 0.24
Delinquent loan ratios - 90 days or more past due including nonperforming loans**
Commercial 0.74 0.84 0.99 1.14 1.37
Commercial real estate 0.59 0.68 0.73 0.75 0.76
Residential mortgages 0.55 0.66 0.74 0.77 0.79
Retail 0.43 0.47 0.51 0.51 0.52
Total loans 0.58 0.66 0.74 0.80 0.88
* annualized and calculated on average loan balances
** ratios are expressed as a percent of ending loan balances
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17. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 17
ASSET QUALITY Table 10
($ in millions)
Jun 30 Mar 31 Dec 31 Sep 30 Jun 30
2005 2005 2004 2004 2004
Nonperforming loans
Commercial $238 $254 $289 $348 $416
Lease financing 60 70 91 91 111
Total commercial 298 324 380 439 527
Commercial mortgages 140 159 175 166 164
Construction and development 21 21 25 35 41
Commercial real estate 161 180 200 201 205
Residential mortgages 42 41 43 46 42
Retail 13 16 17 17 18
Total nonperforming loans 514 561 640 703 792
Other real estate 68 66 72 69 70
Other nonperforming assets 28 38 36 33 49
Total nonperforming assets* $610 $665 $748 $805 $911
Accruing loans 90 days or more past due $258 $285 $294 $292 $293
Nonperforming assets to loans
plus ORE (%) 0.46 0.52 0.59 0.64 0.74
*does not include accruing loans 90 days or more past due
Nonperforming assets at June 30, 2005, totaled $610 million, compared with $665 million at
March 31, 2005, and $911 million at June 30, 2004. The ratio of nonperforming assets to loans and
other real estate was .46 percent at June 30, 2005, compared with .52 percent at March 31, 2005,
and .74 percent at June 30, 2004.
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18. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 18
CAPITAL POSITION Table 11
($ in millions) Jun 30 Mar 31 Dec 31 Sep 30 Jun 30
2005 2005 2004 2004 2004
Total shareholders' equity $19,901 $19,208 $19,539 $19,600 $18,675
Tier 1 capital 14,564 14,943 14,720 14,589 14,294
Total risk-based capital 22,362 23,099 23,352 21,428 21,255
Common equity to assets 9.8 % 9.7 % 10.0 % 10.2 % 9.8 %
Tangible common equity to assets 6.1 6.2 6.4 6.4 6.3
Tier 1 capital ratio 8.1 8.6 8.6 8.7 8.7
Total risk-based capital ratio 12.5 13.3 13.1 12.7 12.9
Leverage ratio 7.5 7.9 7.9 7.9 7.8
Total shareholders’ equity was $19.9 billion at June 30, 2005, compared with $18.7 billion
at June 30, 2004. The increase was the result of corporate earnings offset by share buybacks and
dividends.
Tangible common equity to assets was 6.1 percent at June 30, 2005, compared with 6.2
percent at March 31, 2005, and 6.3 percent at June 30, 2004. The Tier 1 capital ratio was 8.1
percent at June 30, 2005, compared with 8.6 percent at March 31, 2005, and 8.7 percent at June 30,
2004. The total risk-based capital ratio was 12.5 percent at June 30, 2005, compared with 13.3
percent at March 31, 2005, and 12.9 percent at June 30, 2004. The leverage ratio was 7.5 percent at
June 30, 2005, compared with 7.9 percent at March 31, 2005, and 7.8 percent at June 30, 2004. All
regulatory ratios continue to be in excess of stated “well capitalized” requirements.
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19. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 19
COMMON SHARES Table 12
(Millions) 2Q 1Q 4Q 3Q 2Q
2005 2005 2004 2004 2004
Beginning shares outstanding 1,842 1,858 1,871 1,884 1,901
Shares issued for stock option and stock purchase
plans, acquisitions and other corporate purposes 4 4 7 6 4
Shares repurchased (17) (20) (20) (19) (21)
Ending shares outstanding 1,829 1,842 1,858 1,871 1,884
On December 21, 2004, the Board of Directors of U.S. Bancorp approved an authorization to
repurchase up to 150 million shares of outstanding common stock during the following 24 months.
This repurchase program replaced the Company’s previous program. During the second quarter of
2005, the Company repurchased 17 million shares of common stock. As of June 30, 2005, there
were approximately 107 million shares remaining to be repurchased under the current authorization.
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20. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 20
LINE OF BUSINESS FINANCIAL PERFORMANCE* Table 13
($ in millions)
Net Income Percent Change 2Q 2005
2Q 1Q 2Q 2Q05 vs 2Q05 vs YTD YTD Percent Earnings
Business Line 2005 2005 2004 1Q05 2Q04 2005 2004 Change Composition
Wholesale Banking $267 $255 $243 4.7 9.9 $522 $471 10.8 24 %
Consumer Banking 452 405 369 11.6 22.5 857 698 22.8 40
Private Client, Trust
and Asset Management 116 112 95 3.6 22.1 228 196 16.3 10
Payment Services 178 165 161 7.9 10.6 343 309 11.0 16
Treasury and Corporate Support 108 134 169 (19.4) (36.1) 242 371 (34.8) 10
Consolidated Company $1,121 $1,071 $1,037 4.7 8.1 $2,192 $2,045 7.2 100 %
* preliminary data
Lines of Business
Within the Company, financial performance is measured by major lines of business which
include Wholesale Banking, Consumer Banking, Private Client, Trust and Asset Management,
Payment Services, and Treasury and Corporate Support. These operating segments are components
of the Company about which financial information is available and is evaluated regularly in
deciding how to allocate resources and assess performance. Noninterest expenses incurred by
centrally managed operations or business lines that directly support another business line’s
operations are charged to the applicable business line based on its utilization of those services
primarily measured by the volume of customer activities, number of employees or other relevant
factors. These allocated expenses are reported as net shared services expense within noninterest
expense. Designations, assignments and allocations change from time to time as management
systems are enhanced, methods of evaluating performance or product lines change or business
segments are realigned to better respond to our diverse customer base. During 2005, certain
organization and methodology changes were made and, accordingly, prior period results have been
restated and presented on a comparable basis.
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21. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 21
Wholesale Banking offers lending, depository, treasury management and other financial
services to middle market, large corporate and public sector clients. Wholesale Banking
contributed $267 million of the Company’s net income in the second quarter of 2005, a 9.9 percent
increase over the same period of 2004 and a 4.7 percent increase over the first quarter of 2005. The
increase in Wholesale Banking’s second quarter 2005 contribution over the same quarter of 2004
was primarily the result of favorable variances in total net revenue (2.8 percent) and the provision
for credit losses. Partly offsetting these positive variances was an increase in total noninterest
expense (1.4 percent). The favorable variance in total net revenue year-over-year was primarily the
result of growth in net interest income (4.3 percent), as the business line’s noninterest income
remained flat. The increase in net interest income was primarily due to an increase in average loans
outstanding and wider deposit spreads, partially offset by tighter credit spreads. Noninterest income
was flat year-over-year, as declines in commercial products revenue (3.4 percent) and treasury
management fees (1.2 percent) were offset by higher revenue from equity investments relative to
the second quarter of 2004. Wholesale Banking’s unfavorable variance in total noninterest expense
year-over-year was the result of higher compensation and employee benefits, the result of merit-
based increases, new hires and production-based incentives, in addition to higher net shared
services expense. Net recoveries of $16 million in the current quarter, compared with net charge-
offs of $8 million in the second quarter of 2004, drove the favorable variance in the provision for
credit losses year-over-year. The increase in Wholesale Banking’s contribution to net income in the
second quarter of 2005 over the first quarter of 2005 was the result of favorable variances in total
net revenue (1.5 percent) and the provision for credit losses, partially offset by an increase in total
noninterest expense (4.5 percent). Total net revenue was higher on a linked quarter basis, with an
increase in net interest income (3.3 percent) partially offset by a decline in total noninterest income
(1.9 percent). The favorable variance quarter-over-quarter in net interest income was primarily
attributed to an increase in average loans outstanding and deposit balances, as well as wider deposit
spreads. The decrease in noninterest income quarter-over-quarter was due to favorable variances in
commercial products revenue and treasury management fees, which were more than offset by a
decrease in other income related to revenue from equity investments. Commercial products revenue
benefited from stronger capital markets related fees, while the growth in treasury management fees
reflected seasonal tax receipt processing. The increase in total noninterest expense was principally
due to higher net shared services expense related to customer transaction volumes and seasonal tax
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22. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 22
receipt processing activities, partially offset by lower compensation and employee benefits and
other expense. Net recoveries of $16 million in the second quarter of 2005, compared with net
charge-offs of $3 million in the first quarter of 2005, drove the favorable variance in the provision
for credit losses quarter-over-quarter.
Consumer Banking delivers products and services through banking offices, telemarketing, on-
line services, direct mail and ATMs. It encompasses community banking, metropolitan banking, in-
store banking, small business banking, including lending guaranteed by the Small Business
Administration, small-ticket leasing, consumer lending, mortgage banking, workplace banking,
student banking, 24-hour banking, and investment product and insurance sales. Consumer Banking
contributed $452 million of the Company’s net income in the second quarter of 2005, a 22.5 percent
increase over the same period of 2004 and an 11.6 percent increase over the prior quarter. The
favorable increase year-over-year was the result of higher total net revenue (9.1 percent) and lower
provision for credit losses (26.9 percent), partially offset by an increase in total noninterest expense
(2.9 percent). Total net revenue was higher than the same quarter of 2004 due to increases in both
net interest income (10.8 percent) and noninterest income (6.1 percent). Net interest income was
higher year-over-year, primarily as a result of higher deposit spreads, as income from growth in
average loan balances was offset by lower spreads on those assets. Noninterest income improved in
the second quarter of 2005 over the same period of 2004, principally due to growth in deposit
service charges (15.9 percent). Total noninterest expense in the second quarter of 2005 was higher
than the same quarter of 2004, primarily due to an increase in compensation and employee benefits
(5.4 percent), the result of the Company’s in-store branch expansion, other hiring initiatives and
incentives, in addition to higher net shared services expense (5.5 percent). A 26.9 percent reduction
in net charge-offs year-over-year drove the positive variance in the business line’s provision for
credit losses.
The increase in Consumer Banking’s contribution in the second quarter of 2005 over the prior
quarter was the net result of favorable variances in total net revenue (6.5 percent) and provision for
credit losses (15.0 percent), partly offset by an increase in noninterest expense (4.1 percent). Net
interest income was higher quarter-over-quarter largely due to increases in average loans
outstanding and deposit spreads relative to the prior quarter, which were partly offset by lower
credit spreads. Noninterest income was higher (11.6 percent) than the prior quarter primarily due to
growth in deposit service charges, mortgage banking revenue and other revenue, the result of a
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23. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 23
favorable change in lease residual income. The unfavorable variance in total noninterest expense
quarter-over-quarter was driven by an increase in net shared services expense and other expense,
mainly the result of higher marketing and business development expense. A 15.0 percent reduction
in net charge-offs quarter-over-quarter drove the positive variance in the provision for credit losses.
Private Client, Trust and Asset Management provides trust, private banking, financial advisory,
investment management and mutual fund servicing through five businesses: Private Client Group,
Corporate Trust, Asset Management, Institutional Trust and Custody and Fund Services. Private
Client, Trust and Asset Management contributed $116 million of the Company’s net income in the
second quarter of 2005, 22.1 percent higher than the same period of 2004 and 3.6 percent higher
than the prior quarter of 2005. The increase in the business line’s contribution in the second quarter
of 2005 over the same quarter of 2004 was the result of favorable variances in total net revenue (7.9
percent) and the provision for credit losses (77.8 percent). Total noninterest expense remained flat
year-over-year. Net interest income was favorably impacted year-over-year by deposit spreads,
while noninterest income was essentially equal to the same quarter of 2004, as gains from equity
market valuations were offset by lower fees, partially due to a change in the mix of fund balances
and customers’ migration from paying for services with fees to paying with compensating balances.
Lower net charge-offs drove the positive change in provision for credit losses year-over-year. The
increase in the business line’s contribution (3.6 percent) in the second quarter of 2005 over the prior
quarter was the result of higher total net revenue (3.4 percent), partly offset by an increase in total
noninterest expense (1.7 percent) and provision for credit losses. Net interest income and
noninterest income rose quarter-over-quarter by 6.7 percent and 2.0 percent, respectively. The
increase in net interest income was primarily driven by growth in average deposit balances and
favorable deposit spreads, while noninterest income increased largely due to seasonally higher tax
preparation fees. Total noninterest expense was slightly higher in the second quarter due to an
increase in net shared services expense.
Payment Services includes consumer and business credit cards, debit cards, corporate and
purchasing card services, consumer lines of credit, ATM processing, and merchant processing.
Payment Services contributed $178 million of the Company’s net income in the second quarter of
2005, a 10.6 percent increase over the same period of 2004 and a 7.9 percent increase over the first
quarter of 2005. The increase in Payment Services’ contribution in the second quarter of 2005 over
the same period of 2004 was the result of higher total net revenue (11.6 percent) and a slightly
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24. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 24
lower provision for credit losses (2.1 percent), partially offset by an increase in total noninterest
expense (17.4 percent). The increase in total net revenue year-over-year was primarily due to
growth in noninterest income (17.1 percent), partially offset by a reduction in net interest income
(7.2 percent), reflecting higher corporate card balances and rebates. The increase in noninterest
income was principally the result of growth in credit and debit card revenue (12.0 percent),
corporate payment products revenue (16.5 percent), ATM processing services revenue (40.0
percent) and merchant processing services revenue (20.0 percent). All categories benefited from
higher transaction volumes, some rate changes and business expansion initiatives. The growth in
total noninterest expense year-over-year primarily reflected an increase in processing expense
related to the business line’s revenue growth, including costs associated with expansion of the
European merchant acquiring business and other smaller payment services acquisitions. The
increase in Payment Services’ contribution in the second quarter of 2005 over the prior quarter was
primarily due to seasonally strong growth in total net revenue (7.8 percent), partly offset by higher
total noninterest expense (9.4 percent) and provision for credit losses (3.4 percent). Net interest
income decreased 8.5 percent quarter-over-quarter, while fee-based revenue rose by 12.6 percent
due to seasonally higher retail and corporate credit card sales volumes, ATM processing services
revenue and merchant processing fees. The unfavorable variance in total noninterest expense from
the prior quarter was primarily due to personnel and other costs to support ongoing business
expansion and higher processing volumes, in addition to higher net shared services expense.
Treasury and Corporate Support includes the Company’s investment portfolios, funding,
capital management and asset securitization activities, interest rate risk management, the net effect
of transfer pricing related to average balances and the residual aggregate of those expenses
associated with corporate activities that are managed on a consolidated basis. In addition, changes
in MSR valuations primarily due to interest rates are managed at a corporate level and, as such,
reported within this business unit. Operational expenses incurred by Treasury and Corporate
Support on behalf of the other business lines are allocated back to the appropriate business unit,
primarily based on customer transaction volume and account activities, deposit balances and
employee levels and are identified as net shared services expense. Treasury and Corporate Support
recorded net income of $108 million in the second quarter of 2005, compared with net income of
$169 million in the second quarter of 2004 and $134 million in the first quarter of 2005. The
decrease in net income in the current quarter from the same quarter of 2004 was the net result of
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25. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 25
unfavorable variances in net interest income ($147 million), the MSR valuation ($224 million) and
debt prepayment expense ($52 million), partially offset by a $173 million favorable change in net
securities gains (losses) and the $94 million tax benefit realized by the Company in the current
quarter. The unfavorable change in net interest income (56.3 percent) year-over-year reflected the
Company’s asset/liability management decisions to invest in lower-yield floating-rate securities,
higher-cost fixed funding and repositioning of the Company for changes in the interest rate
environment. Net income in the second quarter of 2005 was lower than net income in the first
quarter of 2005, the result of unfavorable variances in net interest income ($36 million), the MSR
valuation ($107 million) and debt prepayment expense ($54 million), partly offset by favorable
variances in securities gains (losses) ($56 million) and the $94 million tax benefit realized in the
current quarter. Total net interest income declined quarter-over-quarter, primarily due to the
continuing asset/liability management decisions of the Company.
Additional schedules containing more detailed information about the Company’s business line
results are available on the web at usbank.com or by calling Investor Relations at 612-303-0781.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, JERRY A. GRUNDHOFER, AND
VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER, DAVID M. MOFFETT, WILL
HOST A CONFERENCE CALL TO REVIEW THE FINANCIAL RESULTS ON TUESDAY,
July 19, 2005, AT 7:00 a.m. (CDT). To access the conference call, please dial 800-540-0559
and ask for the U.S. Bancorp earnings conference call. Participants calling from outside the
United States, please call 785-832-1508. For those unable to participate during the live call, a
recording of the call will be available approximately one hour after the conference call ends
on Tuesday, July 19, 2005, and will run through Tuesday, July 26, 2005, at 11:00 p.m. (CDT).
To access the recorded message dial 888-274-8331. If calling from outside the United States,
please dial 402-220-7332. After July 26th, a recording of the call will continue to be available by
webcast on the U.S. Bancorp web site at usbank.com.
Minneapolis-based U.S. Bancorp (“USB”), with $204 billion in assets, is the 6th largest
financial holding company in the United States. The Company operates 2,383 banking offices and
4,877 ATMs, and provides a comprehensive line of banking, brokerage, insurance, investment,
mortgage, trust and payment services products to consumers, businesses and institutions. U.S.
Bancorp is the parent company of U.S. Bank. Visit U.S. Bancorp on the web at usbank.com.
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26. U.S. Bancorp Reports Second Quarter 2005 Results
July 19, 2005
Page 26
Forward-Looking Statements
This press release contains forward-looking statements. Statements that are not historical
or current facts, including statements about beliefs and expectations, are forward-looking
statements. These statements often include the words “may,” “could,” “would,” “should,”
“believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” “potentially,”
“probably,” “projects,” “outlook” or similar expressions. These forward-looking statements cover,
among other things, anticipated future revenue and expenses and the future prospects of the
Company. Forward-looking statements involve inherent risks and uncertainties, and important
factors could cause actual results to differ materially from those anticipated, including the
following, in addition to those contained in the Company's reports on file with the SEC: (i) general
economic or industry conditions could be less favorable than expected, resulting in a deterioration
in credit quality, a change in the allowance for credit losses, or a reduced demand for credit or fee-
based products and services; (ii) changes in the domestic interest rate environment could reduce net
interest income and could increase credit losses; (iii) inflation, changes in securities market
conditions and monetary fluctuations could adversely affect the value or credit quality of the
Company's assets, or the availability and terms of funding necessary to meet the Company's
liquidity needs; (iv) changes in the extensive laws, regulations and policies governing financial
services companies could alter the Company's business environment or affect operations; (v) the
potential need to adapt to industry changes in information technology systems, on which the
Company is highly dependent, could present operational issues or require significant capital
spending; (vi) competitive pressures could intensify and affect the Company's profitability,
including as a result of continued industry consolidation, the increased availability of financial
services from non-banks, technological developments, or bank regulatory reform; (vii) changes in
consumer spending and savings habits could adversely affect the Company’s results of operations;
(viii) changes in the financial performance and condition of the Company’s borrowers could
negatively affect repayment of such borrowers’ loans; (ix) acquisitions may not produce revenue
enhancements or cost savings at levels or within time frames originally anticipated, or may result in
unforeseen integration difficulties; (x) capital investments in the Company's businesses may not
produce expected growth in earnings anticipated at the time of the expenditure; and (xi) acts or
threats of terrorism, and/or political and military actions taken by the U.S. or other governments in
response to acts or threats of terrorism or otherwise could adversely affect general economic or
industry conditions. Forward-looking statements speak only as of the date they are made, and the
Company undertakes no obligation to update them in light of new information or future events.
###
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27. U.S. Bancorp
Consolidated Statement of Income
Three Months Ended Six Months Ended
(Dollars and Shares in Millions, Except Per Share Data) June 30, June 30,
(Unaudited) 2005 2004 2005 2004
Interest Income
Loans $2,027 $1,740 $3,938 $3,487
Loans held for sale 24 27 45 47
Investment securities 486 444 962 913
Other interest income 28 25 55 47
Total interest income 2,565 2,236 5,000 4,494
Interest Expense
Deposits 361 205 669 432
Short-term borrowings 143 59 255 109
Long-term debt 307 200 578 409
Total interest expense 811 464 1,502 950
Net interest income 1,754 1,772 3,498 3,544
Provision for credit losses 144 204 316 439
Net interest income after provision for credit losses 1,610 1,568 3,182 3,105
Noninterest Income
Credit and debit card revenue 177 159 331 301
Corporate payment products revenue 120 103 227 198
ATM processing services 57 45 104 87
Merchant processing services 198 165 376 306
Trust and investment management fees 253 251 500 500
Deposit service charges 234 202 444 387
Treasury management fees 117 121 224 239
Commercial products revenue 100 108 196 218
Mortgage banking revenue 110 110 212 204
Investment products fees and commissions 39 43 78 82
Securities gains (losses), net 1 (172) (58) (172)
Other 135 107 289 210
Total noninterest income 1,541 1,242 2,923 2,560
Noninterest Expense
Compensation 612 573 1,179 1,109
Employee benefits 108 91 224 191
Net occupancy and equipment 159 153 313 309
Professional services 39 35 75 67
Marketing and business development 67 49 110 84
Technology and communications 113 102 219 204
Postage, printing and supplies 63 60 126 122
Other intangibles 181 (47) 252 179
Debt prepayment 54 2 54 37
Other 199 215 374 386
Total noninterest expense 1,595 1,233 2,926 2,688
Income before income taxes 1,556 1,577 3,179 2,977
Applicable income taxes 435 540 987 932
Net income $1,121 $1,037 $2,192 $2,045
Earnings per share $.61 $.55 $1.19 $1.07
Diluted earnings per share $.60 $.54 $1.17 $1.06
Dividends declared per share $.30 $.24 $.60 $.48
Average common shares outstanding 1,833 1,892 1,842 1,904
Average diluted common shares outstanding 1,857 1,913 1,869 1,927
Page 27
28. U.S. Bancorp
Consolidated Ending Balance Sheet
June 30, December 31, June 30,
(Dollars in Millions) 2005 2004 2004
Assets (Unaudited) (Unaudited)
Cash and due from banks $6,442 $6,336 $7,476
Investment securities
Held-to-maturity 116 127 125
Available-for-sale 42,183 41,354 40,160
Loans held for sale 1,734 1,439 1,383
Loans
Commercial 43,180 40,173 40,065
Commercial real estate 27,743 27,585 27,204
Residential mortgages 17,966 15,367 14,380
Retail 44,555 43,190 41,181
Total loans 133,444 126,315 122,830
Less allowance for loan losses (2,082) (2,080) (2,190)
Net loans 131,362 124,235 120,640
Premises and equipment 1,864 1,890 1,893
Customers' liability on acceptances 95 95 169
Goodwill 6,372 6,241 6,226
Other intangible assets 2,584 2,387 2,475
Other assets 11,229 11,000 9,737
Total assets $203,981 $195,104 $190,284
Liabilities and Shareholders' Equity
Deposits
Noninterest-bearing $33,401 $30,756 $32,786
Interest-bearing 69,690 71,936 71,314
Time deposits greater than $100,000 18,732 18,049 15,827
Total deposits 121,823 120,741 119,927
Short-term borrowings 20,434 13,084 11,592
Long-term debt 34,788 34,739 33,665
Acceptances outstanding 95 95 169
Other liabilities 6,940 6,906 6,256
Total liabilities 184,080 175,565 171,609
Shareholders' equity
Common stock 20 20 20
Capital surplus 5,903 5,902 5,860
Retained earnings 17,849 16,758 15,644
Less treasury stock (3,984) (3,125) (2,316)
Other comprehensive income 113 (16) (533)
Total shareholders' equity 19,901 19,539 18,675
Total liabilities and shareholders' equity $203,981 $195,104 $190,284
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30. U.S. Bancorp
Income Statement Highlights
Financial Results and Ratios
Percent Change
Three Months Ended v. June 30, 2005
(Dollars and Shares in Millions, Except Per Share Data) June 30, March 31, June 30, March 31, June 30,
(Unaudited) 2005 2005 2004 2005 2004
Net interest income (taxable-equivalent basis) $1,761 $1,751 $1,779 .6 % (1.0) %
Noninterest income 1,541 1,382 1,242 11.5 24.1
Total net revenue 3,302 3,133 3,021 5.4 9.3
Noninterest expense 1,595 1,331 1,233 19.8 29.4
Income before provision and income taxes 1,707 1,802 1,788 (5.3) (4.5)
Provision for credit losses 144 172 204 (16.3) (29.4)
Income before income taxes 1,563 1,630 1,584 (4.1) (1.3)
Taxable-equivalent adjustment 7 7 7 -- --
Applicable income taxes 435 552 540 (21.2) (19.4)
Net income $1,121 $1,071 $1,037 4.7 8.1
Diluted earnings per share $.60 $.57 $.54 5.3 11.1
Financial Ratios
Net interest margin* 3.99 % 4.08 % 4.28 %
Interest yield on average loans* 6.21 6.08 5.79
Rate paid on interest-bearing liabilities 2.23 1.97 1.38
Return on average assets 2.23 2.21 2.19
Return on average equity 22.7 21.9 21.9
Efficiency ratio** 48.3 41.7 38.6
Tangible efficiency ratio*** 42.8 39.5 40.1
* On a taxable-equivalent basis
** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income
excluding securities gains (losses), net
*** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income
excluding securities gains (losses), net and intangible amortization
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31. U.S. Bancorp
Income Statement Highlights
Financial Results and Ratios
Six Months Ended
(Dollars and Shares in Millions, Except Per Share Data) June 30, June 30, Percent
(Unaudited) 2005 2004 Change
Net interest income (taxable-equivalent basis) $3,512 $3,558 (1.3) %
Noninterest income 2,923 2,560 14.2
Total net revenue 6,435 6,118 5.2
Noninterest expense 2,926 2,688 8.9
Income before provision and income taxes 3,509 3,430 2.3
Provision for credit losses 316 439 (28.0)
Income before income taxes 3,193 2,991 6.8
Taxable-equivalent adjustment 14 14 --
Applicable income taxes 987 932 5.9
Net income $2,192 $2,045 7.2
Diluted earnings per share $1.17 $1.06 10.4
Financial Ratios
Net interest margin* 4.03 % 4.28 %
Interest yield on average loans* 6.14 5.86
Rate paid on interest-bearing liabilities 2.10 1.42
Return on average assets 2.22 2.16
Return on average equity 22.3 21.3
Efficiency ratio** 45.1 42.7
Tangible efficiency ratio*** 41.2 39.9
* On a taxable-equivalent basis
** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income
excluding securities gains (losses), net
*** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income
excluding securities gains (losses), net and intangible amortization
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32. U.S. Bancorp
Quarterly Consolidated Statement of Income
Three Months Ended
(Dollars and Shares in Millions, Except Per Share Data) June 30, March 31, December 31, September 30, June 30,
(Unaudited) 2005 2005 2004 2004 2004
Interest Income
Loans $2,027 $1,911 $1,878 $1,803 $1,740
Loans held for sale 24 21 23 21 27
Investment securities 486 476 461 453 444
Other interest income 28 27 27 26 25
Total interest income 2,565 2,435 2,389 2,303 2,236
Interest Expense
Deposits 361 308 250 222 205
Short-term borrowings 143 112 80 74 59
Long-term debt 307 271 267 232 200
Total interest expense 811 691 597 528 464
Net interest income 1,754 1,744 1,792 1,775 1,772
Provision for credit losses 144 172 64 166 204
Net interest income after provision for credit losses 1,610 1,572 1,728 1,609 1,568
Noninterest Income
Credit and debit card revenue 177 154 184 164 159
Corporate payment products revenue 120 107 101 108 103
ATM processing services 57 47 43 45 45
Merchant processing services 198 178 181 188 165
Trust and investment management fees 253 247 241 240 251
Deposit service charges 234 210 212 208 202
Treasury management fees 117 107 110 118 121
Commercial products revenue 100 96 108 106 108
Mortgage banking revenue 110 102 96 97 110
Investment products fees and commissions 39 39 37 37 43
Securities gains (losses), net 1 (59) (21) 88 (172)
Other 135 154 143 125 107
Total noninterest income 1,541 1,382 1,435 1,524 1,242
Noninterest Expense
Compensation 612 567 579 564 573
Employee benefits 108 116 98 100 91
Net occupancy and equipment 159 154 163 159 153
Professional services 39 36 45 37 35
Marketing and business development 67 43 49 61 49
Technology and communications 113 106 116 110 102
Postage, printing and supplies 63 63 65 61 60
Other intangibles 181 71 161 210 (47)
Debt prepayment 54 -- 113 5 2
Other 199 175 190 211 215
Total noninterest expense 1,595 1,331 1,579 1,518 1,233
Income before income taxes 1,556 1,623 1,584 1,615 1,577
Applicable income taxes 435 552 528 549 540
Net income $1,121 $1,071 $1,056 $1,066 $1,037
Earnings per share $.61 $.58 $.57 $.57 $.55
Diluted earnings per share $.60 $.57 $.56 $.56 $.54
Dividends declared per share $.30 $.30 $.30 $.24 $.24
Average common shares outstanding 1,833 1,852 1,865 1,877 1,892
Average diluted common shares outstanding 1,857 1,880 1,894 1,904 1,913
Financial Ratios
Net interest margin* 3.99 % 4.08 % 4.20 % 4.22 % 4.28 %
Interest yield on average loans* 6.21 6.08 5.97 5.86 5.79
Rate paid on interest-bearing liabilities 2.23 1.97 1.72 1.55 1.38
Return on average assets 2.23 2.21 2.16 2.21 2.19
Return on average equity 22.7 21.9 21.2 21.9 21.9
Efficiency ratio** 48.3 41.7 48.5 47.2 38.6
Tangible efficiency ratio*** 42.8 39.5 43.6 40.6 40.1
* On a taxable-equivalent basis
** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income
excluding securities gains (losses), net
*** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income
excluding securities gains (losses), net and intangible amortization
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